Question

Barstow Manufacturing Company has two service departments — product design and engineering support, and two production departments — assembly and finishing. The distribution of each service department's efforts to the other departments is shown below:

FROM	TO
	Design			Support			Assembly			Finishing
Design	0	%		10	%		30	%		60	%
Support	20	%		0	%		45	%		35	%

The direct operating costs of the departments (including both variable and fixed costs) were as follows:

Design	$	220,000
Engineering Support	$	240,000
Assembly	$	870,000
Finishing	$	1,320,000

The total cost accumulated in the finishing department using the step method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar; assume that the design department goes first):

Multiple Choice

• $2,850,000.

• $1,043,375.

• $1,090,041.

• $1,566,625.

Answer 1

Answer:

d, $ 1,566,625

Calculation:

Particulars	Design	Engg support	Assembly	Finishing
Operating costs	$       220,000	$       240,000	$         870,000	$       1,320,000
Design	$      (220,000)	$          22,000	$           66,000	$          132,000
Total	$                  -	$       262,000	$         936,000	$      1,452,000
Engg support	$                  -	$      (262,000)	$         147,375	$          114,625
Total	$                  -	$                  -	$     1,083,375	$      1,566,625

Hence, option 'd' is correct and rest all are incorrect.

In case of any doubt, please feel free to comment.